What is a shareholders agreement? (1)

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What is a shareholders agreement?
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• It is a legal contract entered into by the
  shareholders of a company which governs their
  business relationship. Every agreement is
  different but they commonly deal with matters
  such as the sale, transfer or issuing of shares,
  how dividends will be issued, appointment and
  removal of directors and disputes between
  shareholders.

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• Why should you have one?
• Dispute insurance
• A shareholders agreement is akin to an insurance
  policy. Yes, at this point in time you may get
  along with your business partner(s), but if for
  some reason the relationship sours down the line,
  a good shareholders agreement will set out how to
  resolve the dispute at minimal cost to the
  parties.

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• Disputes arise in business more often than
  expected. Business owners are often reluctant to
  invest in shareholders agreements due to the
  cost. However, the initial cost of the agreement
  is small compared to the cost of a potential
  dispute which could include not only lawyers
  fees but also the cost to the business in having
  its shareholders disputing and not focusing on
  business!

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• Personalised
• A good shareholders agreement will reflect how
  you and your business partners want to run the
  business and will be customised to your needs.
  This cannot be changed by anyone except the
  parties to the agreement in writing.

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• Clarity
• It is easy to get caught up in the whirlwind and
  excitement of starting a new business. A
  shareholders agreement provides clarity at the
  outset as to the rights and responsibilities of
  each shareholder in the business. This provides a
  reference point for the parties and also ensures
  that each party can be held accountable.

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• Perception
• A shareholders agreement shows third parties that
  the business is organised and that there are
  solid processes in place. This is particularly
  useful when applying for finance or seeking
  investment from other companies.

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• This is general advice only. Liability limited by
  a scheme approved under Professional Standards
  Legislation.
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